Understanding Initial Coin Offering and How to Choose the Best Investment

If you are looking for an investment, you can consider ICO (Initial Coin Offering). ICO is mostly used by startups to circumvent rigid capital-raising processes required by banks and other venture capitalists. Basically, ICOs instigated a shift in the investment world.

In an ICO campaign, virtual coins will be created and disseminated with the help of blockchain technology. As an investor, you can buy the coins using a fiat currency or virtual currency (like Bitcoin and Ether). Typically, the process is easy – the founders will announce an ICO, create hype and give investors time to buy coins or tokens.

As an investor, how to evaluate ICOs? You need to be wise because ICO is a high-risk way of fundraising. Here are some factors to consider when evaluating the viability of ICOs:

Team composition

You should not invest blindly. With this, it is crucial that you find out everything that you can about the team. The prudent thing to do is to look up every member for relevant experience. This is not very hard because you can easily Google their names. If it is not enough, you can check their LinkedIn profiles.

Stage of the project

Another thing to consider is the stage of the project. If they only have the idea, do not invest. If they have a white paper, make sure that you read the details. The white paper should be well structured and the roadmap should be clear. If they already made an alpha version of the project, check the GitHub. While checking the GitHub, determine how many commits the project gathered.

Media and community

Transparency or openness is critical in ICO. This is how the company gains the trust of the investors. Try to check the community – its size and activities. You can start by checking sources like Facebook, Twitter, and Reddit. However, you need to be careful with bounty posts. These posts give a reward to users for spreading good or positive information about a specific project. Bounty threads or posts are utilised to increase media exposure.

Quality of the code

If you have programming experience, you can easily understand the system. The quality of the developer can be determined by analysing some of their code. If you are not familiar with programming, it is still possible to determine the quality of a developer. You can look at the consistency of the code.

Knowing this, you should not invest anything that you cannot afford to lose. Remember that ICOs lack regulation, which means that there is difficulty in getting back the money you lose in case of failure. Take time to evaluate ICOs before indulging.

Understanding Initial Coin Offering and How to Choose the Best Investment was last modified: August 7th, 2018 by Bean